Olga A. Tilzo     (Novosibirsk State University, 2 Pirogova str., Novosibirsk, 630090, Russian Federation)


We study the monopolistic competition model with producer-retailer-consumers two-level interaction. The industry is organized according to the Dixit–Stiglitz model. The retailer is the only monopolist. A quadratic utility function represents consumer preferences. We consider the case of the retailer's leadership; namely, we study two types of behavior: with and without the free entry condition. Earlier, we obtained the result: to increase social welfare and/or consumer surplus, the government needs to subsidize (not tax!) retailers. In the presented paper, we develop these results for the situation when the producer imposes an entrance fee for retailers.


Monopolistic competition, Retailing, Equilibrium, Taxation, Entrance fee, Social welfare, Consumer surplus

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